Proposals to Tax State Charters Expand Into Three More States
Tax proposals for state-chartered credit unions are falling like snow in several states, while the Utah tax bill was turning into a full-blown blizzard.
New tax bills were emerging in New Mexico, California and Iowa, just as the Utah bill was heading for a final vote in the state legislature.
The broadening threat came as thousands of the credit union faithful braved one of the biggest snowstorms ever to hit Washington to gather for their annual congressional lobbying pilgrimage surrounding CUNA's Governmental Affairs Conference.
CUNA President Dan Mica called on the 3,000 credit union officials attending the conference to ramp up their political advocacy in the states to a level not seen since the national lobby behind HR 1151, the CU Membership Access Act. "We're on code red," said Mica, evoking the national alert surrounding the potential for outside attacks.
Senate Vote In Utah This Week
The alert came as the Utah Senate was preparing a final vote on a credit union tax bill that would, for the first time, assess the state's 5% corporate franchise tax on three large CUs. The bill passed the Senate's Business and Labor Committee on a 5-to-3 vote last Tuesday and was headed for a vote by the full Senate, probably early this week. Brent Allen, vice president of America Fist CU, the state's largest credit union and one of the three targeted by the tax, predicted the vote would be a narrow one. "There's enough undecideds that's it's too close to call," he said.
The stateside threats were growing just as several influential congressmen were downplaying any threat to the federal tax exemption during the GAC.
The Utah drama was reaching its climax just as lawmakers in New Mexico were introducing a similar bill to tax the state's largest credit unions. And a state assemblywoman in California submitted a proposal to study a tax on the biggest credit unions, before pulling her support in the wake of heavy lobbying by that state's credit unions. A credit union tax in Iowa was also being prepared at week's end.
Even though those tax threats appeared to be weak, at least for this year, credit union representatives saw it as a broader signal that the banking lobby, behind each of the initiatives, has decided to use the worsening fiscal crisis in the states to push its decades-old case for credit union taxation.
John McKechnie, chief lobbyist for CUNA, said 44 states are facing budget deficits, giving the bankers' tax drive new impetus.
"The fiscal environment has shifted to the bankers' advantage," said Colleen Kelly, CUNA's vice president for state government affairs. "They have been waiting for this opportunity for years."
The tax bill introduced in New Mexico was similar in wording to the one being fought off by Utah credit unions, as it would assess that state's corporate franchise tax to credit unions over $100 million in assets and operating in multiple counties, according to Tracey Rock, chief lobbyist for the New Mexico CU League. Rock said they were confident of defeating the bill-one of the reason's being New Mexico is among a handful of states not facing a deficit- but they are concerned about the long-term implications as the state's Tax Study Commission is scheduled to issue a comprehensive recommendation on reforming the state's revenue collections system later this year.
The more immediate concern is the potential impact the tax bid will have on pending efforts to modernize the state's credit union statute, which would allow state charters to offer check cashing and wire transfers to non-members within a field of membership (FOM); extend membership eligibility to household members, and give the state regulator greater authority over out-of-state credit unions operating in New Mexico.
In California, credit union lobbyists were confident they had discouraged a major tax push after burying freshman Assemblywoman Cindy Montanaez's office with calls and e-mails immediately after she introduced her bill. Montanaez's legislative director, Janelle Beland, said they were astounded by the quick backlash, but still planned to explore the tax issue as part of a broader bill aimed at studying community outreach by credit unions and service to the underserved, among other things.
"We want to look at both sides of the issue, fiscal and community," Beland said.
Iowa Rep Looks To Utah Model
And in Iowa, Rep. Lance Horbach said he is still planning to introduce a bill similar to the Utah proposal to tax the Hawkeye State's largest, state- chartered credit unions.
Mica said CUNA is prepared to help the states lobby against the tax initiatives in any way it can, including providing funding for media or other purposes. But, he said, they have been told that the intervention by a national group could backfire by creating enmity among local decision-makers who value their independence.
"We'll do anything the leagues ask us to do," said Mica.